TMI Blog1981 (11) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... d gains from business' and not under the head 'Income from house property'. " This question along with other questions were disallowed by the Tribunal and no attempt was made to seek any direction from this court under s. 256(2) of the Act. We mention this fact because, it appears to us, that the question which has been referred to us, would be of academic interest because the finding of the Tribunal that the income would be assessed as business income would still remain. However, as this point has been urged, we propose to go into this question and answer it. It appears that the assessee purchased on 27th February, 1964, a building constructed up to the second floor. The structural work from the 3rd floor to the 8th floor was taken up and almost completed during the financial year 1965-66, and the 4th, 5th and 8th floors were under construction and were finished during the financial years 1967-68 and 1968-69. The assessee maintained its books of account on the basis of the financial year and its accounting year was the financial year. During the financial year 1964-65, the expenses on the electric transformer and lifts came to Rs. 25,000 and Rs. 85,535 respectively. The electric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease stipulated, inter alia, as follows: "TO HOLD exclusively the said ground floor, first floor and second floor of the said premises No. 6, Little Russell Street, Calcutta, TOGETHER with other premises hereby demised (hereinafter collectively, referred to as the demised premises) unto the lessee for a period of twenty-one years commencing on and from 1st day of March, 1964, but determinable earlier as hereinafter provided YIELDING AND PAYING unto the lessor therefor during the said term a clear monthly rent at the rate of sixty-seven naye paise per square feet for the aggregate floor space of twenty-four thousand eight hundred and twenty-one square feet more or less as determined after actual joint measurement rounded off in the monthly sum of rupees sixteen thousand six hundred and twenty and a monthly charge of rupees eight thousand and two hundred for servicing and maintenance of the two lifts to be installed thereat on or before the 30th day of September, 1964, and in all other respects as contained in the covenants on the part of the lessor to he observed and performed aggregating to Rs. 24,820 (rupees twenty-four thousand eight hundred and twenty) only on or before the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s we have mentioned before, the salient features of the agreement were that the tenant, viz., M/s. Siemens (India) Ltd. was require to pay Rs. 16,620 by way of rent and Rs. 8,200 for " servicing and maintenance of two lifts to be installed thereat on or before 30th day of September, 1964, and in all other respects as contained in the covenants on the part of the lessor to be observed and performed ". Thus, the tenant was required to pay a sum aggregating to Rs. 24,820. This clause is the root cause of the controversy between the parties. The lessee, on its part, had bounded itself to pay the monthly rent aid the electric bills as and when they would fall due and also would advance a sum of Rs. 6 lakhs to the lessor to be adjusted against the amounts payable by the lessee. There are also clauses in the agreement requiring the lessee to afford due access to the workmen, agents, engineers, etc., into the demised premises. The lessee was required to pay due. attention while using the demised premises and to keep and maintain the interior of the demised premises in good repair and condition. On the other hand, the lessor was obliged, by the terms of the agreement, to repair, whitewash, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perties Ltd.[1971] 82 ITR 547 was rendered. It was contended before the AAC that what was collected as rent should be treated as income from property and what was collected as service and maintenance charges should be assessed under the head " Business ". The AAC accepted this position and directed the ITO to compute the income under the head " Business ". The Revenue being aggrieved by the said decision went up in appeal before the Tribunal. The Tribunal referred to the different provisions of the lease and the rival contentions and observed, inter alia, as follows: "We have heard both the parties at length, and we find substance in the submissions made by the assessee's counsel. . We have already given, the factual background of the issue involved in this case and have described the various services rendered by the assessee to the tenants. They are practically the same as those rendered by Karnani Properties Ltd., with one minor difference. Considering the elaborate services undertaken by the assessee in the form of watch and ward and scavenging facilities, maintenance of underground drainage for the benefit of the tenants, maintenance of electrical installation and electric pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t confined to the provision of lifts but covered other services as well. The losses incurred by the assessee for some time do not necessarily lead to the inference drawn by the departmental representative that there was no business activity. As for the municipal valuation, it is not determinative of the issue before us and, moreover, the matter is in dispute in a civil suit. It would not be out of place to mention here that the Income-tax Officer has himself accepted the assessee's plea for the assessment year 1967-68 though this by itself may not be conclusive of the issue as pointed out by the departmental representative. For all these reasons, we hold that the Appellate Assistant Commissioner was right in the decision that he took. We may add here that the Appellate Assistant Commissioner has disallowed a part of the director's remuneration. That aspect is being separately dealt with by us in the assessee's appeal and we express no opinion on it in this order." From this order four questions were sought to be raised by the Revenue and as we have indicated above the Tribunal has referred to this court only one question. The question, as we have mentioned before, was whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lit up and the amount attributable to the building only should be assessed under s. 9(1) of the Indian I.T. Act, 1922, while the amount attributable to the amenities provided by the assessee to the tenants should be assessed under s. 12 of the Act. At p. 421 of the report, we observed as follows: " It appears from the two subsequent decisions of the Supreme Court that the proper controversy might have been to decide whether the amount received from the tenants could be attributed to either section 10 or section 12. In this connection reference may be made to the decision of the Supreme Court in Sultan Brothers Private Ltd v. Commissioner of Income-tax [1964] 51 ITR 353 (SC) and the decision of the Supreme Court in the case of Karnani Properties Ltd. v. Commissioner of Income-tax [1971] 82 ITR 547. Bat we are not concerned with that controversy, since the question referred to us is a limited one and since the Tribunal has not found the facts necessary for deciding whether the amount could be apportioned between section 10 and section 12 of the Act, which seems to be, according to the aforesaid decisions of the Supreme Court, the appropriate heads under which the amount should be t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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